13 ways for farmers to lose money in 2013

SALEM, Ohio — Lose money in 2013? Who wants to lose money? Are you crazy?

And yet, farmers and landowners everywhere — every year — overlook some of the basics that would help them save money or make money. So we decided to create a list of ways to lose money this year* (in hopes that you’ll not take our advice). Here are our top 13, in no particular order of unprofitability:

1. Ignore financial record keeping.

I mean, c’mon, who has time to file or record all those invoices, or assign expenses to a particular enterprise? Reconcile statements? Just trust the bank. Don’t you make your money out in the field or in the milking parlor? I’m sure that stack of papers and records on top of the filing cabinet is complete. Every co-op receipt, every vet bill. Just do it Dec. 30.

Don’t bother creating an annual profit and loss statement, cash flow summary, or balance sheet. Who really needs to accurately track costs of production, anyway? And definitely don’t bother doing an inventory (isn’t that just for hardware stores?). You can remember how much hay was in the barn last January, right? And the bunker silo was about 80 percent full, for sure.

The beauty of a farm is that you can keep all your household and farm accounts together, too.

2. Cancel some of your insurance coverage.

The money you’ll save by not paying premiums is golden. It’s a risk worth taking.

3. Pretend you’ve never heard of 1099s.

Farmers don’t really need to issue 1099s, do they? A root canal or colonoscopy is more fun than having to ask someone for his Social Security number or tax ID number, just so you can comply some tax law. So what if you’ve paid that unincorporated business or person (think neighbor who does custom work, cash rent landlord, accountant/tax person, repair person, etc.) at least $600 or more (or a lot MORE)? You’d rather talk about “feelings” at the local coffee shop than ask for a tax ID number.

Of course, Dave Miller, with Wright Law Co. in Dublin, Ohio, would advise that you assume everyone you do business with is going to go over that magic threshold of $600 and have them complete a W-9 (official IRS form) before they are paid the first time during the year. “It is amazing how quickly business folks will provide the needed information so they can get paid.”

He would say that, he’s an enrolled agent, which is a fancy description for someone who can represent taxpayers before the IRS.

You won’t go broke if you don’t issue 1099s, right? Just take the gamble. The IRS penalties are just $100 for each form that wasn’t filed that should have been. Ignore Miller when he says if the authorities decide there was intentional disregard for the law, the penalty is $250 per form with no limit on the total penalty amount.

And we’re sure it’s just an old wives’ tale that some experts have indicated that the IRS may disallow the reportable expense if there was no 1099 issued.

You really enjoy calving out cows, right? So you don’t want to have all that fun in too short of a timeframe and want spread that enjoyment over several months, right?

“I really don’t like calving in cold weather, so we start in the spring, go right through the summer, and into the fall,” Grimes says. “There’s nothing like calving in shirt-sleeve weather!”

Look at the advantages: You’ll never overwork your herd bull; he can breed a few more cows if he doesn’t have to get them all bred in a short time. You love to work cattle and calving over many months gives you several opportunities to sort, vaccinate, and wean calves.

And long calving season also extends your marketing season and spreads out your cash flow.

“An extended calving season can give me a wide range of calf weights that may allow me to hit the highest price on any given week,” Grimes adds. “This wide range of ages allows me to make several trips to the local auction market and I can always use a good excuse to have lunch at the sale barn diner!”

5. Buy the same corn hybrid you always have.

Corn hybrids really don’t change yield potential that much from year-to-year. The variety you’ve been using the past 15 years will do just fine. Your dad always used it, too, even though his farm was in Alabama. Plus, the cows always liked it for silage (thank goodness, you sold them 10 years ago and don’t have to milk twice a day anymore). Don’t worry about the stalk rot that plagues you in some fields, and just plant the same maturity in all your fields. If you do switch this year, just buy from the neighbor-seed corn dealer and forget about all that performance data schmata. He wouldn’t steer you wrong.

6. Don’t bother soil testing.

(They’re just trying to sell you something.)

You soil tested five years ago, so don’t bother doing it again this year. Just keep doing the same fertility recommendations that you got that last time. You’ll be fine. It’s not like we had a drought or anything last year.

And don’t get sucked into that whole grid sampling concept. A field is a field is a field. Dirt is dirt.

7. Buy a bull every two years.

This is another gem from John Grimes, OSU Extension beef coordinator:

“I own a small herd of beef cattle. I usually run about 17 or 18 cows and keep back two or three heifers for replacements. Even though the heifers are difficult to manage with the mature cows, I always raise my own replacements because I can’t find heifers better than I can produce. Besides, I’m sure I can raise them cheaper than those big outfits that raise dozens at a time and breed them artificially to proven calving ease sires.

“I typically buy a herd bull every two years. I need a bull that has enough calving ease so I don’t have calving difficulties with the two or three heifers I keep back. I am willing to give up some performance on the calves out of the mature cows to make sure I don’t have problems with the heifers.

“Since I keep heifers out of my bull, I have to buy a new bull every two years so I don’t have a bull breeding his own daughters. I’ve had bulls that sired outstanding calves that I wished I could have had kept a little longer, but simply couldn’t because I kept their daughters.

“At least I don’t have to worry about my mature bull getting too big and wanting to go visit the neighbor’s cows!”

8. Sit tight and do nothing.

We wanted the best advice for marketing our grain, so we turned to our fearless grain commentator, Marlin Clark. His advice for 2013? Do nothing.

“I have always tried to live by the axiom that I should do something, even if it is the wrong thing,” Clark says. Not this year.

Just let it ride, don’t bother thinking about what is next in your business. You know, “if it ain’t broke, don’t fix it.”

Taking action or making an action plan does not guarantee success, so why would you want to anticipate events that never happen? “Your prediction of the future might have all the success of stirring tea leaves or chicken entrails.”

If you are following a plan, that just means you have a jumping-off place to react, and you’ll know that when it happens anyway, right?

“If you have no plan, you will be late to realize that events are conspiring against you, and too late to make a better plan,” Clark added.

Clark admits that those in the grain business always preach about making a marketing plan. “The trouble is, we have to make assumptions about prices, and we really have no ability to control them, only react to them.”

“If we have a plan that assumes one of several price events may occur, we have direction set ahead of time. It is just a matter of reacting and implementing a different part of the plan.”

Then Clark quoted Bill Wallbrown, general manager of Deerfield Farms Service, who’s known for preaching two things: Be “proactive,” and, “Those who fail to plan, plan to fail.”

But, hey, having no plan is a plan itself, wouldn’t you say?

9. Plan to live forever.

Who can keep all those estate and inheritance tax issues, and investment accounts, insurance policies and retirement accounts straight? Besides, you created a will when you got married 27 years ago. Nothing’s changed since then. I mean, you’re just doing what everyone else is doing — 86 percent of Americans haven’t updated their wills or other estate-planning documents the last five years.

And your family knows exactly what you want done with the farm after you’re gone, so you really don’t need to have a succession plan or talk to an adviser about it. Whoever said, “Every farm has a beginning, middle and an end,” doesn’t know your farm. It’ll last forever.

10. Just turn the cows (or sheep or whatever) out.

Fencing in the Back 40 counts as pasture management. You used to throw some heifers out there in the ’70s, and the grass was good enough for them then, so it’s probably still decent feed for your current herd or flock. If they get hungry enough, they’ll eat anything. It’s got a creek running through it, so they’ll have access to water, too.

The more we think about it, the better it sounds. That way, you won’t have to clip any of those pastures or make hay in those fields at all. The grass might get a little high, but eventually it’ll get eaten. Don’t worry about reseeding, it’ll fill in itself. And you don’t need to worry about soil fertility because — duh — the manure will fertilize the pasture just fine.

All those people who keep talking about portable fencing and moving cows every three days are just nuts. Who has that time to spare?

11. Sign on the dotted line.

If the landman said this is the best deal for an oil or gas pipeline easement on your property, and the offer’s on the table for only five days — sign. He means it, and you can’t just tell him what you want, can you? You talked to your neighbor, and it’s the same agreement he signed 10 years ago, so just sign. Why would you want to pay some overpriced lawyer to look it over?

12. Hire the cheapest labor you can find.

There’s no loyalty or pride in farm employees any more, so forget trying to keep good ones and just go cheap. The turn-over might be a little bit of a pain, but it’s really not going to cost you that much in your lost time to find, hire and train another worker.

So what that the new guy is not all that reliable, or never calls when he’s hungover and isn’t coming to work. And the fact that he whines constantly and bad mouths you behind your back isn’t affecting his work or anyone around him, right? I mean, you gotta be a little flexible about the milking parlor cleaning procedures sometimes. Is it really that critical?

And you don’t want someone who’s really going to think for themselves, do you? You want them to do exactly what you tell them and no more.

13. Repeat after me: It’ll never happen to me.

‘Nuf said.

(*Editor’s note: We really want you to do the opposite of what we’re suggesting, and are hoping the over-the-top suggestions, like “don’t soil test” will push into soil testing and MAKING money this year!)

One Comment

Have a family member farmer who could be the model of this story. Also have never understood the logic of borrowing unjustified money to pay interest to keep from paying taxes. Farmers I work with seem to think I do not pay taxes, only they do.